How to fill out Form 8833 using Rev Proc 2010-19

[monster22]

Hi,

I left Canada and moved to the US in Feb 2020 and I will be filing tax for deemed disposition of my stocks in Canada. To adjust cost basis in the US, I need to fill out Form 8833 using Rev Proc 2010-19, and I have couple of questions for filing this form.

1. Do I have to recognize the capital gain on the deemed disposition when filing form 8833? If so, do I use foreign tax credit to avoid double taxation on the capital gain for my US tax return?
2. If in the future I sell the stocks, how do I fill out schedule D? Do I just use fair market value I entered in 8833 as the adjusted cost basis? Any other forms I need to attach for future year tax return?
3. How should I fill in line 2,4 and 5 in form 8833?

Thanks!

[nelsona]

1. No you would not report the deemed disposition.
2. You would use the cost basis reported on your 2010-19 statement, ie the deemed disposition value. That is all.
3.
2: leave blank
3: leave blank
5: no
The important thing is attaching your deemed disposition form from your Cdn departure return T1243.

[monster22]

Thank you nelsona for replying!

But I saw on Page 4 of Rev Proc 2019-19 that
"
(3) The individual must make the election by ...... Treaty Based Return Position Disclosure under section 6114 or 7701(b) of the Internal
Revenue Code, stating that the individual is making an election to pay U.S. federal
income tax on a deemed disposition of property pursuant to new Article XIII(7)
"

Regarding my 1st question above, does it mean I need to report capital gain on my deemed disposition to IRS and pay tax accordingly to IRS? I'm a bit confused.

[nelsona]

No. unless you are subsequently selling the property in question in the same tax year, there is no need to list these on Schedule D (they would be zero gain in any event, as the proceeds would be equal to the cost basis, by definition). Including the Cdn form is sufficient.

Remember to use the correct section of Rev Proc. Unless you owned US real estate before your departure, you should be only using section 4.02.

[nelsona]

You will not have to submit anything extra in the year(s) that you do eventually sell these investments. As long as you filed the 8833 with the T1243, and keep this documentation, any questions arising as to the cost basis can easily be answered. Remember, as with any investments, the cost basis will change if you have reinvested dividend distribution etc in the intervening time between deemed disposition and actual sale, so you always need goood record-keeping, kepy in case IRS wants to see it. They don;t want you to send them anything they don;t specifically ask for.